China’s consumer inflation eased to its lowest rate in two and a half years in July, giving the government more leeway to loosen credit to spur the slowing economy.
The Consumer Price Index (CPI), a key gauge of inflation, grew to 1.8 percent year on year in July, the slowest rate since February 2010, the National Bureau of Statistics (NBS) announced Thursday.
The rate was 0.4 percentage points lower than the figure for June.
The Producer Price Index (PPI), a main gauge of inflation at the wholesale level, fell 2.9 percent in July from a year earlier, the New China News Agency (Xinhua) reported.
The easing inflation is believed to be a result of the base effect. The CPI growth rate hit a 37-month high of 6.5 percent in July last year before gradually retreating as China’s economy slowed for eight quarters in a row.
Food prices, which account for nearly one-third of the prices used to calculate China’s CPI, edged up 2.4 percent in July from a year ago, down from a growth of 3.8 percent in June.
Surging vegetable prices were the driving force for the CPI’s growth. Rain and flooding affected vegetable production in many places during the peak supply season, pushing up vegetable prices by eight percent.
To boost growth, the government has loosened the monetary supply, cut taxes for small businesses and encouraged private businesses to invest in sectors previously closed to them.